16 October 2008

The growth of BRICs

According to some analysts, the repercussions of the current crisis could be mitigated by the fast growth in BRICs (Brazil, Russia, India and China), generating demand for exports.
The current problems have, nevertheless, already spilled over to some BRIC countries.
Firstly, a piece from Financial Times:

Banks across Russia have faced a rise in outflows as depositors have begun to lose trust in all but the biggest state banks, VTB and Sberbank, which have received most of the government’s liquidity support.Tatyana Sadovskaya, the director of a branch of Khnati Mansisk Bank in the city of Nizhnevartovsk, on Wednesday told Interfax news agency that in response to rumours of her bank’s insolvency: “People have formed long lines at cashiers and at bankomats, people are taking their deposits and closing their accounts.”Natalia Elisseva, vice-president for financial development at the Bank Nizhni Novgorod, based in the city of the same name, said the number of clients closing accounts had risen. “If there is something that can sink the banks, it is panic amongst the population . . . If there is a panic, not one bank will stand, regardless of state support.

On the other, the Economist reports that China is well-placed to cushion the global slowdown:

China’s GDP growth slowed to an annual rate of a mere 10.1% in the second quarter of this year, from 12.6% a year earlier, and most economists expect it to drop to 8-9% in 2009. But this slowdown should partly be welcomed, because the economy had been exceeding its speed limit for several years. Better still, China’s growth next year will come entirely from domestic demand, as its trade surplus shrinks. If the global downturn forces China to switch the mix of growth from exports to consumption, it would also help to make its future growth more sustainable.

The government is expected to supply a fiscal stimulus to keep growth above 8%. The package will include tax cuts and extra infrastructure spending. Economists are also urging increased spending on social welfare to encourage consumers to save less and spend more. China has ample room for a stimulus because it boasts the healthiest fiscal position of any big economy. According to Stephen Green, an economist at Standard Chartered, it has a budget surplus of 2% of GDP, if measured in the same way as in rich economies, and public-sector debt is a mere 16% of GDP. China’s readiness to use fiscal lubrication is the best reason for hoping that its economic motor will not stall.


André Luis Pulcherio said...

Putin's Russia has been known for the wild swings - political or economical. The painful part for me is to see Brazil in the same situation, despite all the progress we thought we made... I'll post something about that soon, come back in a while, if you're interested!

Kordian K said...

Yyeeeahh, I love this knowing smile on my lecturer's face when he explains to us the difference between the impact of this recent crisis on China and let's say (Poland or US:)))

I discovered a little spelling mistake. It's not a Khnati Mansiysk but Khanti Mansiysk, the name derived from the two tribes living in the sophomore autonomous region (okrug). Nizhnevartovsk is the second largest town there (population over 200.000) and it is said to be one of the richest in the whole Russia due to the oil production.

Go ahead Andre Luiz! It's hard to get credible information on Brazil in Poland (it's quite fat away, after all) and I'm interesting in scientific data on this big country rather than in the usual cliches (soccer, samba, rain forest, coffee, favelas, you know:), though I admit I absorbed many facts on Brazilian football players nevertheles..

bathmate said...

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